OREANDA-NEWS. Fitch Ratings has placed HCC Insurance Holdings, Inc.'s (NYSE: HCC) ratings on Rating Watch Negative, including its 'A+' Issuer Default Rating (IDR) and 'AA' Insurer Financial Strength (IFS) ratings for HCC's operating subsidiaries. A complete list of ratings follows at the end of this release.

KEY RATING DRIVERS
Fitch's rating action follows the announcement today that Tokio Marine Holdings, Inc. (Tokio Marine; 'A+' IFS) and HCC have entered into a definitive agreement whereby Tokio Marine will purchase all outstanding shares of HCC for \$7.5 billion, or approximately a 38% premium to yesterday's closing stock price for HCC, in an all-cash transaction. The close is expected to occur in the fourth quarter of 2015, subject to regulatory and HCC shareholder approvals.

This transaction further diversifies Tokio Marine's non-Japan-generated premiums to approximately 38% of premiums derived outside of Japan on a pro forma basis. Past U.S.-based specialty insurers acquired by Tokio Marine include Delphi Financial Group, Inc. and Philadelphia Consolidated Holding Corp.

The Rating Watch Negative reflects that HCC's ratings can be constrained by Tokio Marine's lower ratings, which are also affected by the Japanese sovereign rating of 'A'. Resolution of the Rating Watch is anticipated to coincide with the closing of the transaction, and will consider how HCC fits within the management and corporate structure of Tokio Marine, future operating strategies and profit expectations for HCC, and any changes in capital management targets going forward. The review will also include an assessment of Tokio Marine's plans to utilize capital distributions from U.S. insurance operations' to meet holding company obligations.

RATING SENSITIVITIES
Fitch notes that if the acquisition occurs, HCC ratings could be lowered by one to two notches as Tokio Marine's ratings are lower and constrained by the sovereign rating of Japan. Should this acquisition fail to materialize Fitch would likely affirm HCC ratings.